Chapter 20 Accounting True/False Questions

A perpetual inventory system provides day-to-day information about the quality of merchandise on hand.

False

The first-in, first-out (FIFO) method is used to determine the quantity of each type of merchandise on hand.

False

The net income of a business can be increased by maintaining a merchandise inventory that is larger than needed.

False

The only financial statement on which the value of merchandise on hand is reported is the income statement.

False

A merchandise inventory evaluated at the end of a fiscal period is known as a periodic inventory.

True

A minimum inventory balance is the amount of merchandise that will typically last until ordered merchandise can be received from vendors.

True

A periodic inventory conducted by counting, weighing, or measuring items of merchandise on hand is also called a physical inventory.

True

Many merchandising businesses use a POS terminal to read UPC codes on products and update the stock ledger.

True

Merchandise inventory on hand is typically the largest asset of a merchandising business.

True

The gross profit method makes it possible to prepare monthly income statements without taking a physical inventory.

True